EU banks fear impact of new stress tests

THIS year’s health check of Europe’s banks will provide “unprecedented” new insight about the industry that will be useful in a time of market turmoil, the head of the regulator overseeing the test said yesterday.

“We are still in a very fragile area,” Andrea Enria, chairman of the European Banking Authority (EBA), said in regard to current market conditions.

He said the EBA will for the first time look at confidential data and challenge it, before releasing it for supervisors and investors to assess.

“We will put an unprecedented amount of data out there,” Enria said.

There had been calls from some countries, including Germany, to limit the amount of data that is disclosed.

In a letter to the EBA, German banking association ZKA (Zentraler Kreditausschuss), which represents the five associations of German banks, warned that “should publication take place in the envisaged form, we fear that it will not help in any way to build confidence or calm the markets – on the contrary, quite the opposite is likely to occur”.

“Given the tense situation which already exists in money and capital markets, we believe publishing the results with the present level of detail would exacerbate the sovereign debt crisis,” it added.

The warning however seemed to have fallen on deaf ears.

The templates on how much data would be disclosed had not been changed and the EBA had not replied to the letter, according to sources close to the association.

The ZKA complained that publication would reveal “deep insight into a bank’s business strategy, market positioning and risk profile on a hitherto unprecedented scale.”